Bayesian Target Zones

Catherine Forbes and Paul Kofman
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Paul Kofman: University of Melbourne

No 32, Research Paper Series from Quantitative Finance Research Centre, University of Technology, Sydney

Abstract: Several authors have postulated econometric models for exchange rates restricted to lie within known target zones. However, it is not uncommon to observe exchange rate data with known limits that are not fully 'credible'; that is, where some of the observations fall outside the stated range. An empirical model for exchange rates in a soft target zone where there is a controlled probability of the observed rates exceeding the stated limits is developed in this paper. A Bayesian approach is used to analyse the model, which is then demonstrated on Deutschemark-French franc and ECU-French franc exchange rate data.

Keywords: bayesian estimation; griddy-Gibbs sampler; credible target zones; soft margins; european monetary system (search for similar items in EconPapers)
JEL-codes: C11 C13 F31 F33 (search for similar items in EconPapers)
Date: 2000-03-01
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Citations: View citations in EconPapers (9)

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Related works:
Working Paper: Bayesian Target Zones (2000)
Working Paper: Bayesian Soft Target Zones (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:uts:rpaper:32

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